When you're registered for GST/HST, you can deduct eligible business expenses and claim input tax credits on the GST/HST you pay for those purchases. However, not all business expenses qualify for deduction, and the rules depend on whether your expense is directly related to earning income and whether GST/HST applies to it. Understanding which expenses are deductible helps you maximize tax efficiency and avoid costly mistakes on your GST/HST filings. The Canada Revenue Agency (CRA) allows you to deduct business expenses that are incurred to earn income. This is the golden rule: if you buy something or pay for a service specifically to run your business, it's generally deductible. Common deductible expenses include: Supplies and materials used in your business Office equipment and furniture Rent for your business location Utilities and phone bills (business portion only) Wages and salaries for employees Professional fees (accountants, lawyers, consultants) Advertising and marketing costs Business insurance premiums Vehicle expenses (fuel, maintenance, insurance for business use) Software subscriptions and licenses Travel expenses for business purposes Even if you use something for your business, certain expenses cannot be deducted.
Only 50% of eligible meals and entertainment expenses can be deducted, and only if they are directly related to earning income (such as client meetings). Personal meals and social entertainment are not deductible.
No, some items like basic groceries, prescription medications, and certain professional services have zero or reduced GST/HST rates. You can only claim input tax credits on purchases where GST/HST was actually charged.
You can deduct a proportional share based on the square footage of your dedicated business workspace relative to your total home size. For example, if your home office is 10% of your home's total area, you can deduct 10% of eligible home expenses like rent, utilities, and insurance.
Yes, the CRA requires you to keep detailed receipts and supporting documentation for all business expenses for at least six years. Without receipts, the CRA can deny your deductions and assess penalties.
You can only deduct the portion of vehicle expenses that relate to business use. Keep a log of business miles and personal miles, then calculate the percentage of business use. Only that percentage of fuel, maintenance, and insurance is deductible.